High raw material and operational costs, issues over supply of key raw materials and overcapacity in the market. This description sounds a lot like the challenges presently faced by the printing ink industry.

However, that sentence also describes the same challenges that the pigment industry is trying to overcome. Much like its customers in the ink industry, pigment manufacturers are working through higher costs. They are also facing competition from other industries for key raw materials – for example, naphthalene and copper – that are essential for pigments. The increased competition for copper is impacting phthalo blue and green as well as metallic pigments.

Overcapacity is another serious concern. The emergence of offshore pigment sources led to more competition and lower prices, which, in turn, impacted established pigment suppliers.

In The Pigment Report, beginning on page 26, industry leaders discuss the challenges they are facing. Pigment industry executives also describe how they are overcoming these hurdles.

The approaches that are being taken should sound fairly familiar to the ink industry. In terms of pricing, pigment manufacturers have cut costs and become more efficient, and when it is absolutely necessary, raised their own prices. Those price increases typically don’t come close to covering the pigment manufacturers’ higher costs.

Ink manufacturers are also familiar with supply concerns, as they are facing competition for key ingredients ranging from acrylic acid to naphthenic oils. How pigment and ink companies respond to potential shortages will be critical.

Overcapacity is also plaguing the ink industry. On the pigment side, companies are consolidating or setting up joint ventures, while the ink industry went through a major merger and acquisition wave in 2005. In the end, the most efficient companies are surviving in both industries.

There is another interesting approach. Pigment manufacturers are noting that new products are helping to drive higher prices, as ink companies are interested in improved performance and are willing to pay for better results. Ink companies have also been emphasizing better performance in order to get a greater return on their investment.

Ultimately, the fact is that higher prices and supply issues are likely to remain, and in order to survive, ink and pigment manufacturers alike need to improve their margins. Higher prices are a reality in today’s business world.